This morning when I went to bed around 2:30am London time the storm circling Wall Street was still out at sea. Now, a mere few hours later, things are in full swing. Not only has Lehman Brothers filed for chapter 11 bankruptcy but Merrill Lynch has been sold to Bank of America. Also, AIG and Washington Mutual are also now under threat. Others I’m sure will unfortunately follow. So maybe, just maybe we are getting close to the bottom of this financial crisis.
Either way, it will be interesting to see what happens after the dust settles. Government I am sure will want to rush in with all sorts of new “better” regulation. However, as someone who worked for a company that profited greatly after Sarbanes-Oxley Act was introduced in the wake of the Enron scandal, I am not so sure that more regulation is the answer. Because when I look back on things, the only people that really benefitted from Sarbanes Oxley were the consultants and lawyers. Plus, unless there is ongoing oversight and understanding of all the various exotic structured banking products like collateralised debt obligations with their limited transparency, things won’t really change.
Of course, the near collapse of the financial markets as we know it is on a whole other level than the collapse of Enron. So maybe, just maybe, with closer oversight by the Federal Reserve Bank and Treasury Department things will be different in the future. I suppose only time will tell.